travel tech insights

Is anyone in the industry paying attention to the topic of travel agency cost control? It doesn’t seem like it. There are articles on travel trends, mobile apps, emerging destinations and changing markets – but not much on the subject of how to improve travel agency profitability. So perhaps this is the right time to share thoughts and hopefully start some conversations on effective ways to control costs.

If asked to name industries most affected by the Internet since the 1990’s, most people would think of online retailers like Amazon – draining sales away from small and large store-based retailers; or perhaps the music industry – careening from vinyl to CD’s, CD’s to mp3s and ultimately to Spotify. Both are good answers. Another answer might be storefront travel agencies; certainly the widespread acceptance of online travel agencies (OTA) transformed the agency business model. However, the ultimate fate of the traditional agency remains an open question. Ironically, technology – which crippled the travel agency twenty years ago – may be the very thing that saves them in the 21st century.

Some travel trends are difficult to discern; millennial behavior, for example. What is that generation really thinking? We know what they reveal in surveys, but the information can be contradictory or speculative and getting hard data on behaviors can be challenging.

It’s tempting to look back on 2015 for clues of what lies ahead for the travel industry in 2016, and there is some value in that approach. Certainly technology will continue to impact how people purchase and experience travel; distribution channels will continue to evolve and the industry as a whole will continue to grow. But there’s a limit to what clues from the prior year can tell us and also a point at which trying to read tea leaves from the past amounts to a distraction more than anything else.

There are very few people who haven’t heard the refrain, “I know half my marketing expenditure is a waste of money, I just don’t know which half.” One reason for this saying’s longevity is that it contains a kernel of truth; every travel company would love to know exactly what turns a visitor into a customer – so it could only spend money on what makes that happen.

Online product and services reviews have shifted transaction influence from the provider to the consumer, rewarding companies who deliver excellent customer service and experience, and making life difficult for those who don’t. Within the travel industry, TripAdvisor delivers millions of customer judgements across travel providers, all of whom recognize the value in keeping in the customer’s good graces.

However, not all travel websites apply the lessons and value of customer reviews to themselves, certainly providing consumers with travel provider reviews but not necessarily reviews for their own role in the customer’s travel experience process.

The travel agency has seen its share of changes over recent years. Marketing channels used to be called the front door of the agency or the telephone. Then online booking arrived in the travel industry, bringing with it: pricing transparency; e-commerce; new distribution relationships and altered commission structures.

For most travel businesses the first reactions to these changes were reactive changes to their business models – and it made sense. When price transparency drops margins and commissions are shrinking, finding ways to cut costs and increase efficiencies provides more immediate relief than creating new revenue streams with higher profitability. However, in 2016 proactive changes in travel agency business models will likely accelerate, particularly in the area of digital transformation.

The beginning of the New Year is the perfect time to take a serious look at your travel technology; the holiday travel rush is over, the staff is back from holiday, a preliminary view of 2015 results is coming into focus and planning for 2016 is being finalized.

This look must be a serious one because: technology plays an increasingly important role in differentiating products and services within the travel marketplace; implementing new technology can be disruptive; and correctly evaluating an existing travel system along with other choices requires time and a sound process.